New York State sets out subsidy proposals

12 July 2016

The New York Department of Public Service has put forward a proposal to help preserve New York's upstate nuclear power plants by valuing their zero-emissions attributes based on the social cost of carbon. The department estimates that the state will realize $5 billion in benefits in the first two years alone if the proposal is implemented.

Earlier this year the State of New York Public Service Commission ruled that non-carbon-emitting generation resources including nuclear power plants must be included in the state's Clean Energy Standard (CES) portfolio. It also directed that the CES must include a support mechanism for upstate nuclear power plants at risk of closure for economic reasons. The Department of Public Service's proposal sets out such a support mechanism. The Public Service Commission has invited the public to comment on the proposal, published on 8 July. The deadline for written comments is 18 July.

The proposal has been drawn up by Department of Public Service staff after taking into consideration comments already received. It takes the approach of valuing and paying for the zero-emissions attributes based on a formula using published projections of the social cost of carbon from the US Interagency Working Group. So-called Zero Carbon Electric Generating Facilities would receive subsidies "when there is a public necessity to encourage their preservation" through Zero Emissions Credits (ZEC). The proposal would be implemented in six tranches over a period of 12 years starting 1 April 2017.

In drawing up its proposals the department referred to a report issued by the Brattle Group which found that replacement of at-risk plants with equivalent amounts of fossil-fuelled capacity would in a two-year period result in increases of carbon emissions with an estimated societal cost of $1.4 billion.

The proposals project that at the time of inception of the program there is a "public necessity" for subsidies for the Fitzpatrick, Ginna and Nine Mile Point facilities - sometimes referred to as the upstate plants - but not for any other facility. According to the Department of Public Service, the owner of the state's other nuclear plant, Indian Point, "has not claimed that the zero-emissions of the Indian Point facility are currently at risk". Entergy has already announced plans to close the single-unit Fitzpatrick plant in February 2017 for economic reasons, and its two reactors at Indian Point, 24 miles from New York City, have not been included in the CES.

The benefits of paying such subsidies would far outweigh the costs, the Department of Public Service said. During the first two years of the program economic and environmental benefits associated with carbon reductions, supply cost savings and property tax benefits are estimated to be about $5 billion, while total payments are calculated to be up to $965 million - a net benefit of $4 billion.